With renewed optimism of a US Federal Reserve interest rate cut, Wall Street will begin a holiday-shortened week on Tuesday with eyes turned toward a labor market report.
The major indices ended relatively flat after a week of volatile trading. The Dow Jones Industrial Average fell 0.16 percent from the prior week to finish at 13,357.74 points on Friday while the tech-rich NASDAQ rose 0.76 percent to 2,596.36 points. The broad market Standard & Poor's 500 index ended 0.36 percent lower than a week ago, at 1,473.99 points.
Bonds gained on the market turbulence. The yield on the 10-year Treasury bond fell to 4.537 percent on Friday from 4.633 percent a week earlier, and that on the 30-year Treasury dropped to 4.831 percent from 4.897 percent. Bond prices and yields move in opposite directions.
The market continued weeks of turbulence due to a credit crunch that originated in the high-risk subprime mortgage sector, where lenders offer home loans to people with shaky credit.
Investors are worrying about the unknown extent of the economic damage from the credit fallout. Foreclosures are rising as some home owners, particularly those with adjustable-rate mortgages, find they cannot make their payments as interest rates climb.
Counting on the Federal Reserve to ease monetary policy and soothe the markets, investors finally were reassured on Friday by a speech by Fed Chairman Ben Bernanke and measures to help distressed homeowners unveiled by US President George W. Bush.
"The [Fed] continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets," Bernanke said in his first public remarks since the mortgage-related credit crunch roiled markets around the world early last month.
Bernanke's speech, to a Fed symposium in Wyoming, "was the minimum the market wanted to hear," said Marc Pado, an analyst at Cantor Fitzgerald.
The speech "wasn't exciting, but it was reassuring," he said.
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